Since joining Vestas in September, I have had the pleasure of getting to know Vestas, its employees, customers, suppliers and owners. These past months have confirmed to me both that our industry holds a high potential as an answer to the growing demand for clean, reliable electricity, and that Vestas and its employees have what it takes to lead this industry into a new era.
What is also clear, however, is that the market conditions are changing: Growth in energy demands is shifting away from what has historically been amongst the wind industry’s key markets, competition is increasingly fierce and regulatory conditions uncertain in a number of markets.
In order to achieve profitable growth, Vestas needs to adapt to this changing reality.
At the end of 2013, we can conclude that we have taken the first steps in doing so by successfully completing our two-year turnaround.
Our annual results demonstrate a Vestas significantly more profitable than two years ago, while our ability to generate a positive cash flow has greatly improved. Consequently, we have reduced our net debt by around EUR 1bn over the past year, ending 2013 with a net cash position of EUR 86m.
We have made considerable improvements across the organisation to deliver on the promises to our shareholders:
First and foremost, we have lowered our fixed capacity costs by almost EUR 500m, among other things, by reducing the number of employees. Secondly, we have reduced the number of factories from 31 to 19 and we have kept our investments at a low level, while bringing five new wind turbine variants to the market.
An order intake of around 6 GW across 37 countries on six continents underlines that by doing so, we delivered what customers want: reliable products that continuously lower the cost of energy.
Another sign of our technological position was the announcement of a joint venture with Mitsubishi Heavy Industries Ltd. (MHI) dedicated to offshore wind power. Combining MHI’s strong, global position and experience within the power industry with Vestas’ wind power know-how, makes a strong partnership. And with the first prototype of the V164-8.0 MW turbine – the world’s most powerful wind turbine – now installed in Denmark, one quarter ahead of the original schedule, the joint venture is off to a good start.
Setting the future direction
Vestas’ transformation over the past two years has increased our focus on our core competencies and made the company leaner, more cost-efficient and flexible.
The direction we now set for Vestas going forward builds on this progress, as this will ensure we continue to lead the wind industry while ultimately delivering profitable results.
Grow profitability in mature and emerging markets As growth in electricity demand is shifting from Europe and North America to new regions like Asia, Latin America, and Africa, many new markets for wind power are developing. Vestas has already gained a first-mover advantage in many of these; in fact, Vestas operates in more countries than any of our competitors, and we will continue to use our global presence and expertise to pursue opportunities in these promising markets.
Capture full potential of the service business
We aim to make the service area an even more important part of our business, and we will build on three key advantages in doing so: our installed base of 60 GW, our position as the only truly global provider of service solutions and our industryleading ability to analyse and predict wind conditions anywhere on the globe.
Combined, this gives us the opportunity to develop new service offerings to further increase the power production from our customers’ wind power plants.
Reduce levelised cost of energy
To ensure maximum output for our customers, we will continue to base our product development on evolution of our tested 2 MW and 3 MW platforms. By reducing the complexity of our wind turbine designs and use more standard components, we will achieve lower cost while maintaining the high levels of quality and power output our customers have come to expect.
We underline our confidence and commitment to this approach by our aim to reduce the cost of energy faster than the market.
Improve operational excellence
Lowering cost and improving efficiency will remain a key priority for Vestas. We will build on the substantial results we have achieved over the past years to improve earnings and the competitiveness of our products.
This will include exploring the possibility of outsourcing the production of non-core technology. It is also our aspiration to translate Vestas’ business volume into the lowest sourcing, transport and manufacturing costs in the wind industry.
A positive outlook
The progress we have made over the past two years, thanks to the dedicated efforts of our employees, means that Vestas today is strong and well-positioned to thrive and prosper in a challenging and maturing industry with rising demands from customers and society.
Executing on our strategy will ensure we make the most of this opportunity:
We will gain the financial strength and stability which we need to be a trusted partner in a competitive marketplace.
We will be able to deliver greatly improved value and return on investment to our customers, bringing us closer to fulfilling our vision of making wind an energy source on a par with oil and gas.
And we will continue to grow profitably to ultimately deliver optimal value creation to our shareholders.
Links to annual report 2013